PSI Ohio Insurance Practice Exam

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Study for the Ohio Insurance Test. Prepare with flashcards and multiple choice questions, each question accompanied by hints and explanations. Excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which type of annuity provides a benefit linked to an underlying investment account to offset inflation?

Fixed annuity
Interest-sensitive annuity
Variable annuity
Immediate annuity

The correct answer is: Variable annuity

A variable annuity is designed to provide benefits that are linked to the performance of underlying investment options, such as stocks and bonds. This connection to investments allows for the potential for growth that can keep pace with, or even outstrip, inflation over time. Because the value of the annuity can fluctuate based on market performance, it offers the opportunity for increased returns that fixed payments from a fixed annuity would not provide. In contrast, a fixed annuity guarantees a specified payout amount, which does not adjust with inflation, and an immediate annuity begins payments right away based on a predetermined amount as well, with similar characteristics. An interest-sensitive annuity may have some variability based on interest rates but doesn't directly link to market investments in the same manner as a variable annuity. Thus, the variable annuity stands out as the option that can provide a hedge against inflation through investment-linked benefits.